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Minn. House passes GOP business tax elimination

The Minnesota House on Wednesday passed a
Republican-sponsored bill to reduce and ultimately eliminate state
property taxes on businesses, but Democrats criticized the measure
for shifting money away from a tax credit for renters.

The House passed what Republicans call the "tax relief and job
creation act" on a 72-62 party line vote. Its centerpiece is a
one-year freeze on a state-imposed property tax, paid by businesses
and corporations, followed by a permanent phase-out over 12 years
that would begin in 2014.

"It encourages businesses to stay here, expand here, to move
their operations here and create more jobs," said Rep. Bob
Gunther, R-Fairmont. "It declares to job creators around the
country that Minnesota is open for business."

The tax, properly known as the commercial/industrial tax, now
raises about $880 million a year for the state. To cover expenses
lost from eliminating the tax, Republicans proposed a reduction in
the size of a state credit that renters receive for the portion of
their rent that covers the building owner's property tax.

Democrats called that a clear case of shifting tax policy in a
way that harms the poor and middle class in favor of the wealthy.

"This is not Minnesota nice, when you are placing a much higher
priority on wealthy corporations over our senior citizens and our
middle-class families. That is extreme," said Rep. Paul Marquart,
DFL-Dilworth.

Marquart said about 30 percent of the roughly 300,000 people who
qualify for the credit - a renter currently must earn less than
$55,000 a year to get it - are senior citizens or disabled people.
He said the average senior citizen would lose about $100 a year.
Under the legislation, seniors and the disabled who make less than
$40,000 a year will be eligible; everyone else will have to make
less than $25,000 a year to get it.

Republicans in both the House and Senate have pushed to
eliminate the business property tax as the best way to improve the
state's job climate. Republicans share the emphasis on creating new
jobs with Democratic Gov. Mark Dayton, who has proposed a $3,000
per-hire tax credit for every Minnesota business that hires a
currently unemployed person, a military veteran or a college
student.

Dayton's proposal did not make it into the House tax bill under
debate Wednesday. Neither did a Senate version that was unveiled
earlier in the day.

Like the House Republicans' bill, the signature item in the
Senate bill is the business property tax phase-out by 2026. The
bill's author, Sen. Julianne Ortman, said it would make it easier
for companies to hire more people.

"It should be an urgent issue," said Ortman, R-Chanhassen.

The Senate bill also contains relief for married couples on
their 2012 income taxes. It does not reduce the renter's credit,
which Ortman has said she does not support. Instead, it aims to
make up the difference in unspecified cuts to state agencies.

Both Ortman and the House Taxes Committee chairman, Rep. Greg
Davids, have said they are open to negotiating a tax relief and
jobs bill with Dayton. But Dayton has been cool to the idea of
eliminating the business property tax, saying it should be part of
a larger package that also aims to reduce property taxes on homes.

The House tax package also increases a research and development
tax credit, provides a sales tax exemption for businesses with
fewer than 20 employees, and extends a tax credit of up to $14,400
for employers who hire veterans who are disabled, unemployed or on
food stamps.

Republicans said the business property tax makes Minnesota's tax
burden on businesses among the country's highest, while the state's
residential property tax rates are more in line with other states.

But Rep. Ann Lenczewski, DFL-Bloomington, criticized the tax
elimination as an ineffective way to create jobs.

"You don't have to create a job to get any money here," Lenczewski said. "You just get it."